Driving for Dollars Bad, Driving For Dumpsters Good (HA 004)

Transcript:

Steven:                                Steve and Jill here.

Jill:                                          Hi.

Steven:                                Welcome to the House Academy Show, entertaining real estate investment talk. I’m Steven Jack Butala.

Jill:                                          And I’m Jill DeWit, broadcasting from sunny Southern California.

Steven:                                Today, we talk about how driving for dollars is bad, but driving for dumpsters is good.

Jill:                                          What? Isn’t that funny? It sounds really confusing, but hopefully you get it. And I’m going to do my best. I’m going to say it right now, I promise you, I will try to hold down my personal feelings about the whole driving for dollars. I’ve even seen “D for D”, and then “D for” and then dollar signs. I’ve seen people try to make cute little things like that online. However cute you think it is, it’s just not necessarily the best use of your time and we will explain.

Steven:                                Here’s a spoiler alert. Jill and I are incredibly anti driving for dollars. It’s a waste of time.

Jill:                                          Yes.

Steven:                                You’re below it. If you do it, it’s way below you.

Jill:                                          Yeah.

Steven:                                You are way above it. In the time that you spend one day driving for dollars, you can send 10,000 offers out, blind offers out to owners.

Jill:                                          And then wait for the phone to ring.

Steven:                                And buy some houses. Jill will explain in a minute.

Jill:                                          You just did.

Steven:                                She gets angry.

Steven:                                Before we get into it, let’s take a question posted by one of our members on the houseacademy.com online community. It’s free.

Jill:                                          Okay, Jefferson asked, “Do you apply the same methodology for pricing SFRs in House Academy as you do for land?” This is good for price, okay, got it.

Steven:                                You want to explain it?

Jill:                                          Yeah, go for it.

Steven:                                No, you go. You want to do it?

Jill:                                          No, you do it. That’s on your side of the sheet.

Steven:                                So, in both cases, when you’re pricing land, it’s usually by county and not by zip code, the way that we price houses. And with land, we price it per acre and we’re usually shooting like a shotgun. It’s a shotgun approach.

Steven:                                With houses, it’s a very specific rifle approach. As I’ve said a few times on the show already, pit zip codes against each other, choose the best ones, and then we take algorithms from Zillow, Trulia, and all the rest of them, line them up against the data in DataTree, in preparation to send the offer campaign out. And then we price each asset individually. We never, ever send a mailer out that says, “we’re interested in buying your house.”

Jill:                                          Right.

Steven:                                “Give us a call.”

Jill:                                          Exactly.

Steven:                                That’s how you can destroy your career in two weeks that way. You want to send them an offer that says, “we’re interested in buying your house in ten days for 321,000 dollars… 321,427.77”. And the question is, how do you get to that number? You input algorithms, you choose how much margin you want. Let’s say you want to make 40,000 to 50,000 dollars selling the house, and you send the offer out that way. And you do it up to 10,000, 20,000. We have members who send 50,000 units out at a time.

Jill:                                          That’s crazy.

Steven:                                So, to answer your question directly, is the methodology the same? The end result, when they open the mail, is the same. You’re trying to evoke that decision when they open the mail. Is the methodology to get there the same? No, it’s a little bit more sophisticated with land. But I will have to say, with houses, it’s easier.

Jill:                                          I think it is easier, yeah.

Steven:                                And less time consuming.

Jill:                                          Yeah, you really have with houses, the numbers are there. The numbers are the numbers are the numbers. There’s no, “I think this area is going for this price per acre, and I think over here is this price per acre, I’m trying to find consistency.” That’s land. Houses is like, “nope, we know exactly how it’s valued here, how it’s valued there, okay, the average is that, done.” It’s so much easier and then, like you just said, all you’re doing is backing out what you want to make out of it. And then the only thing you want to do is, we’re fans of, hey, let’s not get greedy, everybody. Because the less greedy you are, the better response you’re going to be, the more deals you’re going to do, and quickly, and move on.

Steven:                                Exactly.

Jill:                                          Thank you.

Steven:                                Today’s topic: driving for dollars is bad, driving for dumpsters is good. This is why you’re listening.

Steven:                                Let’s define driving for dollars, without giving each other a heart attack.

Jill:                                          I have 10 business cards. My goal today, here I go. [crosstalk 00:04:37] I have 10 business cards, I’ve got a nice, new, crisp shirt on. I got a full tank of gas. I got my lunch next to me.

Steven:                                Oh, Jill.

Jill:                                          I’m sorry. I have a thing about this, obviously.

Steven:                                Oh, man.

Jill:                                          And you know what? I know this subdivision, I know it well. I know what I can do with that subdivision, and I’m going to get as many as I can until I find a house. What happens? My goal is after eight hours, or ten hours, or until somebody calls the cops… by the way, I’m surprised that doesn’t come up more often.

Steven:                                Yeah.

Jill:                                          When you really think about it.

Steven:                                Plus, who’s home during the day?

Jill:                                          Exactly, that’s another one, too.

Steven:                                And what type of asset are you looking for while you’re driving around?

Jill:                                          I never thought about that. Who’s even home? What are they going to do to you when you’re knocking on the door? It’s just not a good scenario. And your goal is to find somebody and hope that they’re thinking about selling their house. Maybe you’re looking for the junky ones, thinking that’s going to have the best-

Steven:                                That’s the problem. That’s the real tragedy in this.

Jill:                                          I know, and that may be the real problem properties. Maybe walk up to the real junky one and by the way, there are squatters, and they’re-

Steven:                                Okay, you’re getting way off topic here.

Jill:                                          Sorry, sorry.

Steven:                                There’s all kinds of things that can happen.

Jill:                                          Okay.

Steven:                                But here’s the problem with driving for dollars: it’s inefficient. It’s time inefficient, it’s dollars inefficient.

Jill:                                          Yeah.

Steven:                                And what you’re really doing is driving around, looking for a dumpy, boarded up house in probably a neighborhood you shouldn’t have chosen in the first place.

Jill:                                          Good point.

Steven:                                You’re not using data. You’re using not brain, you’re using brawn. And it’s terribly, terribly inefficient. Here’s the real tragedy: it works. Driving for dollars works the same way that pulling on a slot machine handle 4,200 times eventually will work.

Jill:                                          It’s true.

Steven:                                And so, it gives you the sense of tiny, little bit of hope.

Jill:                                          True.

Steven:                                What I’ll call “false hope.”

Jill:                                          Right.

Steven:                                When you could be, never leave your desk and through the magic of mail merge and offers to owners and a bunch of other tools that we provide, that you don’t even necessarily need to use. You don’t need to use our tools or be in our group to benefit from this.

Jill:                                          There’s another way to do it.

Steven:                                Do a mail merge, send out a couple thousand offers, if you want to lick stamps, do it. I’m not a big fan of that. I don’t think it makes financial sense, I know it doesn’t. But, if you’re just starting out and that’s what makes sense to you, you’re going to get a good response.

Jill:                                          Yep.

Steven:                                And the person that you find that either answers that door while you’re driving for dollars or the person that owns a dumpy house in a different state that’s falling down, they might respond to you. But now what you’re buying is a dumpy house. And so, the reason that people sell their houses for less than they’re actually worth, that minute and in that condition, is because they just had a life change and you’re solving a problem for them.

Jill:                                          Right.

Steven:                                Maybe somebody passed away, maybe somebody went to college. Maybe they just hate real estate agents with a passion and they just want to deal with an owner. All those things happen to us regularly, all of them. So it’s not the condition of the asset that you should focus on. Forget about the house, forget it. For the rest of your career, buying and selling houses, forget about the actual asset. That’s way, way, way secondary.

Jill:                                          Right.

Steven:                                The price is what matters, and how efficiently you can get somebody who owns a property to sign it and send it back to you.

Jill:                                          Awesome. Ding, ding. Now let’s explain the dumpsters.

Steven:                                Yes.

Jill:                                          Now, what’s funny is we talked about this because driving for dollars for finding the asset, not good, obviously. Driving for dumpsters is good, a great way for buyers. Here’s why: you’ve done it all the right way, just like we’ve talked about and Steven described. You have this asset now that is worth 50,000 dollars, or whatever number you went in on, less than what it’s worth. Who are you going to sell it to? You’re going to sell it to the guy that’s right down the street, across the street, one block over, who’s got a dumpster in the yard and has already got the crew over here and he would love to get that phone call or message or email from you.

Steven:                                Yeah, he’s already renovating a project or-

Jill:                                          He’s got the team.

Steven:                                Some are already all in place.

Jill:                                          He knows the area.

Steven:                                You think he’s going to want to do another one two blocks away? Heck yeah.

Jill:                                          Yep.

Steven:                                And from not an agent, and not from the MLS, and from somebody who’s just regular people like us and regular people like you.

Jill:                                          Yep.

Steven:                                That’s how you do it. That’s how we do it.

Jill:                                          You better believe it. It’s the best thing.

Steven:                                It’s not the only way, but that coupled with some other things, a well strategically sent mailer, it’s going to work. It does work. Very, very predictable numbers for us constantly.

Jill:                                          Right.

Steven:                                That’s why we’re in front of the camera right now.

Jill:                                          Exactly.

Steven:                                So, I’m sorry to say, driving for dollars, as appealing as it may seem, here’s the thing: driving for dollars is seemingly free. Sending mail out is not free, there’s stamps involved. That’s why people get so sidetracked. Walking into a casino is free, they don’t charge you at the door.

Jill:                                          Yep.

Steven:                                Pulling that handle’s a little bit expensive, but let’s see what happens.

Jill:                                          Yep. Hey, stay tuned, too. In other episodes, we’re going to talk about more of our transactions. In case you don’t know, we have close to 16,000 completed transactions combined, more him, under our belts. Yeah, a lot of them are land, but let me tell you, a lot of them are houses, too, and other types of properties. Even commercial properties, commercial land, all kinds of things that we’ve done. So that’s why we’re here. This week has been just kind of about what’s possible and who we are and just some things to share with you now. But as this show progresses, we’re going to get into some real numbers and share some transactions.

Steven:                                The actual deals.

Jill:                                          And gosh, tell you things that we did wrong and things we’ve learned and things that went great. So we’ll get you there.

Steven:                                Exactly. Join us next time for the episode called, “What is Equitable Title?”

Jill:                                          And we answer your questions posted on our online community, houseacademy.com. It’s free.

Steven:                                You are not alone in your real estate ambition.

Jill:                                          I’m trying to remember when we started House Academy. What did we share so people knew-

Steven:                                You mean Land Academy?

Jill:                                          Yeah, Land Academy, excuse me. This is not our first podcast. You know what’s so funny? We’re on show 1,000 over there, I don’t remember show zero over there.

Steven:                                Episode zero in Land Academy was called, “Everybody Thinks I’m a Drug Dealer.” And I was going to repeat that [crosstalk 00:11:16] Jill and I have this, “our friends think we’re drug dealers.”

Jill:                                          Yeah, there’s a little bit of that.

Steven:                                We have too much time on our hands, there’s lots of money coming in, we have good sports cars and stuff. There’s obviously nothing like that going on. I filed our tax returns on time and there’s never been any issues. But we do live that kind of lifestyle, where we have control of our time and the cars we drive are too fast.

Jill:                                          Right. Well, you know what’s interesting in this world? Sometimes we make it look easy, but there’s a lot to it. That’s why we’re doing this show and that’s why we have our online community. We have weekly member calls, we do all kinds of things to support you and help you because there’s a lot of moving pieces, but we can get you there.

Jill:                                          Wherever you’re watching or wherever you are listening, please subscribe and rate us there.

Steven and Jill:                   We are Steve and Jill.

Steven:                                Information-

Jill:                                          And inspiration-

Steven:                                To buy undervalued property.

 

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